Forecasting grid capacity reduces electricity prices

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Georg Rute, CEO

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Transporting cheap clean electricity

Electricity is cheap if there is plenty of transmission capacity in the grid (source). With lots of transmission capacity the cheapest power plant can always sell all of its power. Over the long term solar and wind will be built in the best places. The energy transition happens faster and everybody wins.

But transmission capacity is limited today. The quickest way to increase grid capacity is to maximise the usage of the existing power lines. Dynamic Line Rating has been shown to increase capacity by up to 30% on an annual basis. 

However, that increase in grid capacity is in real time and not day-ahead. And this makes a world of a difference. Increasing grid capacity in real time helps reduce system operation costs for grid operators, but does nothing for power prices.

Energy markets operate day-ahead

Electricity is bought and sold day-ahead. Tomorrow’s price of electricity is determined today. It is only grid capacity that is opened up to the market for tomorrow that brings down power prices for people and industry.

How much cheap power Germany can import from Sweden and Norway obviously depends on the strength of the power lines connecting the countries. This needs to be known at least one day ahead. Dynamic Line Rating only helps reduce power prices if it is made available for tomorrow.

Image from ACER

Physical sensors on power lines are great for grid operation in real time, but they fundamentally cannot forecast what tomorrow’s weather will be like. With physical sensors grid operators can reduce risk and save costs, but the effect on consumers’ energy bill is marginal at most.

Grid operators are tasked with operating the grid and ensuring there are no blackouts. It is not the primary task of grid operators to ensure cheap energy for consumers. Of course therefore DLR applications focus on reducing system operation cost, not the price of electricity.

Forecasting Dynamic Line Ratings to reduce energy prices

Clean energy can only proceed if renewable projects pay back their investment. Forecasting Dynamic Line Ratings for day-ahead power markets significantly help smooth out power prices between regions. In the process consumers benefit from lower prices overall and renewable developers earn back their investment.

To bring a real-world example, in the case of Elia in Belgium, Dynamic Line Ratings were implemented a decade ago to help reduce the risk of blackouts one winter. Transmission capacity from France and the Netherlands was increased with the help of DLR sensors. Inspired by this success the Belgian regulator required Elia to continue offering additional grid capacity also on day-ahead markets so that consumers can benefit from lower prices. Other regulators should follow suit!

Offshore wind farm photo by Nicholas Doherty on Unsplash

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